Bond Market Update

Auction Reaction

• U.S. Treasuries are hanging onto gains with most tenors having spent the past couple hours in a sideways range just below session highs. The 2-yr note lagged at the open and it remains behind, though it also finds itself in positive territory at this time, thanks in part to a post-auction boost stemming from the just completed spectacular sale of $69 bln in 2-yr notes. The auction drew a high yield of 3.580%, which stopped through the when-issued yield by 1.4 basis points (biggest stop-through since August) while the bid-to-cover ratio (2.75x vs 2.60x average) and indirect takedown (64.4% vs 61.8% average) were well above average. The sale will be followed by a $70 bln 5-yr note offering tomorrow.
• Yield Check:
  • 2-yr: -1 bp to 3.59%
  • 3-yr: -2 bps to 3.65%
  • 5-yr: -3 bps to 3.81%
  • 10-yr: -3 bps to 4.21%
  • 30-yr: -3 bps to 4.80%